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SMALL BUSINESS
Dr Pepper Snapple Group Reports First Quarter 2009 Results
First quarter earnings per share excluding certain items were
Net sales, as adjusted, up 4% on 5% BCS volume growth. Reported net sales down 3%.
Company generated
Company raises guidance for 2009 earnings per share excluding certain items to
For the first quarter, reported net sales declined 3%. Excluding the loss of Hansen product distribution and on a currency neutral basis, net sales increased 4% on 6% sales volume growth and solid pricing actions. Net sales growth was negatively impacted by a higher mix of carbonated soft drink (CSD) concentrates and value juices. Segment operating profit, as adjusted, increased 18% reflecting lower commodity and fuel costs, operating benefits from higher volumes and a strong cost control focus. Reported income from operations was
DPS President and CEO
Young added, "As we look ahead, we see a
Earnings per share reconciliation First Quarter Percent 2009 2008 Change
Reported earnings per share $0.52 $0.38 37
Items affecting comparability - Net gain on Hansen termination and sale of certain distribution rights (0.15) - - Restructuring costs - 0.02 ----- ---- --- EPS excluding certain items $0.37 $0.40 (8)
Volume (BCS), sales volume, net sales and segment operating profit, as adjusted, in the tables and commentary below exclude the loss of Hansen product distribution and are on a currency neutral basis. For a reconciliation of non-GAAP to GAAP measures see page A-5 accompanying this release.
Summary of 2009 results Percent change as Percent change as reported adjusted First Quarter First Quarter Volume (BCS) 4 5 Net Sales (3) 4 Segment Operating Profit 9 18
BCS - bottler case sales
Volume (BCS)
For the quarter, volume increased 5%. CSDs increased 5% and non-carbonated beverages (NCB) increased 6%.
In CSDs, Dr Pepper volume was up 1%. "Core 4" brands - 7UP, Sunkist, A&W and Canada Dry - were up slightly. Growth in 7UP, up 3%, and Canada Dry, up 4%, was offset by a 5% decline in Sunkist. Crush volume tripled, adding 10 million cases in the quarter on expanded third party bottler distribution. Fountain/foodservice volume increased 2%.
In NCBs, Hawaiian Punch volume increased 31% on strong promotional activities and favorable comparisons in the prior year period. Pressure on the company's premium products continued with volume down 16% led by a 22% decline in Snapple. Mott's juices and sauces increased 2%. In
By geography, U.S. and
Across all measured channels, as reported by The Nielsen Company, the company grew U.S. CSD dollar share 0.8 percentage points year-to-date.
Sales volume
For the quarter, reported sales volume increased 5%. Sales volume, as adjusted, increased 6% and exceeded BCS volume by one percentage point as third party bottlers built their concentrate inventory positions to support expanded Crush distribution.
Summary of 2009 Percent change as Percent change as Segment results reported adjusted First Quarter First Quarter Sales Net Sales Net Volume Sales SOP Volume Sales SOP Beverage Concentrates 7 9 19 7 11 21 Packaged Beverages 4 (3) 6 5 3 20 Latin America Beverages 0 (23) (47) 1 1 (14) Total 5 (3) 9 6 4 18
SOP - Segment Operating Profit
Beverage Concentrates
Net sales for the quarter increased 11% reflecting sales volume growth led by expanded Crush distribution and mid-single digit price increases taken at the beginning of the year. Segment operating profit increased 21% reflecting net sales growth and lower compensation related costs partially offset by higher marketing investments.
Packaged Beverages
Net sales for the quarter increased 3% reflecting low single-digit sales volume growth in CSDs, strong double-digit sales volume growth in Hawaiian Punch and solid pricing actions across CSDs, Snapple and Mott's partially offset by double-digit sales volume declines in premium beverages and negative product mix. Segment operating profit increased 20% reflecting net sales growth, lower commodity and fuel costs, increased operating efficiencies from higher volumes and strong cost controls.
Net sales for the quarter increased 1% reflecting sales volume growth, led by new route expansion and Crush innovation partially offset by continued softness in Aguafiel. Segment operating profit decreased 14% reflecting net sales growth offset by increased selling and distribution costs related to new routes added toward the end of 2008.
Corporate and other items
For the quarter, corporate costs increased
Net interest expense increased
The effective tax rate was 38.3%. This included a tax expense of
Cash flow
For the quarter, the company generated
2009 full-year guidance
The company continues to expect full year 2009 reported net sales to be down 2% to 4%. Excluding the loss of Hansen product distribution and on a currency neutral basis, the company expects net sales to grow 2% to 4%.
Excluding net gains related to distribution agreement changes, the company now expects full year 2009 earnings per share in the
- Improved CSD and value juice trends partially offset by ongoing weakness in premium beverages;
- Improvements in commodity and other ingredient costs as well as foreign currency;
- Operating efficiencies driven by higher volumes; and
- A reduction in the company's full year tax rate to approximately 38% to 39% driven by favorable tax planning initiatives. This rate includes approximately
$21 million of charges related to items that are indemnified by Cadbury.
In support of new product launches, the company expects to incur a greater portion of its annual marketing spend in the second quarter of 2009 compared to 2008, where the spend was in the third quarter.
The company expects to make cash contributions totaling
Capital spending is expected to be approximately 5% of net sales.
The company remains committed to using its free cash flow to pay down debt and expects to reduce its debt obligations by at least
Segment reporting changes
Effective
The company provided unaudited supplemental information presenting historical results under the new segment reporting format in an 8-K filed
Forward looking statement
This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including, in particular, statements about future events, future financial performance, plans, strategies, expectations, prospects, competitive environment, regulation, and cost and availability of raw materials. Forward-looking statements include all statements that are not historical facts and can be identified by the use of forward-looking terminology such as the words "may," "will," "expect," "anticipate," "believe," "estimate," "plan," "intend" or the negative of these terms or similar expressions. These forward-looking statements have been based on our current views with respect to future events and financial performance. Our actual financial performance could differ materially from those projected in the forward-looking statements due to the inherent uncertainty of estimates, forecasts and projections, and our financial performance may be better or worse than anticipated. Given these uncertainties, you should not put undue reliance on any forward-looking statements. All of the forward-looking statements are qualified in their entirety by reference to the factors discussed under "Risk Factors" in Part I, Item 1A of our Annual Report on Form 10-K for the year ended
Conference Call
At
In discussing financial results and guidance, the company may refer to certain non-GAAP measures. Reconciliations of any such non-GAAP measures to the most directly comparable financial measures in accordance with GAAP can be found under "Financial Press Releases" on the company's website at http://www.drpeppersnapple.com in the "Investors" section.
Definitions
Volume (BCS) or bottler case sales: Sales of finished beverages, in equivalent 288 fluid ounce cases, sold by the company and its bottling partners to retailers and independent distributors. Volume for products sold by the company and its bottling partners is reported on a monthly basis, with the first quarter comprising January, February and March.
Sales volume: Sales of concentrate and finished beverages, in equivalent 288 fluid ounce cases, shipped by the company to its bottlers, retailers and independent distributors.
Pricing refers to the impact of list price changes.
About Dr Pepper Snapple Group
Dr Pepper Snapple Group, Inc. (NYSE: DPS) is the leading producer of flavored beverages in
DR PEPPER SNAPPLE GROUP, INC. CONSOLIDATED STATEMENTS OF OPERATIONS For the Three Months Ended March 31, 2009 and 2008 (Unaudited, in millions, except per share data)
For the Three Months Ended March 31, --------- 2009 2008 ---- ----
Net sales $1,260 $1,295 Cost of sales 531 565 --- --- Gross profit 729 730
Selling, general and administrative expenses 499 508 Depreciation and amortization 27 28 Restructuring costs - 10 Other operating income (62) (2) --- -- Income from operations 265 186
Interest expense 55 48 Interest income (1) (17) Other income (3) - -- --- Income before provision for income taxes and equity in earnings of unconsolidated subsidiaries 214 155 Provision for income taxes 82 60 -- -- Income before equity in earnings of unconsolidated subsidiaries 132 95 Equity in earnings of unconsolidated subsidiaries - - --- --- Net income $132 $95 ==== ===
Earnings per common share: Basic $0.52 $0.38 Diluted $0.52 $0.38
Weighted average common shares outstanding: Basic 254.2 253.7 Diluted 254.3 253.7
A-1
DR PEPPER SNAPPLE GROUP, INC. CONSOLIDATED BALANCE SHEET As of March 31, 2009 and December 31, 2008 (Unaudited, in millions except share and per share data)
March 31, December 31, 2009 2008 ---- ---- Assets Current assets: Cash and cash equivalents $219 $214 Accounts receivable: Trade (net of allowances of $13 and $13, respectively) 525 532 Other 63 51 Inventories 286 263 Deferred tax assets 87 93 Prepaid expenses and other current assets 71 84 -- -- Total current assets 1,251 1,237 Property, plant and equipment, net 1,001 990 Investments in unconsolidated subsidiaries 12 12 Goodwill 2,982 2,983 Other intangible assets, net 2,704 2,712 Other non-current assets 558 564 Non-current deferred tax assets 132 140 --- --- Total assets $8,640 $8,638 ====== ======
Liabilities and Stockholders' Equity Current liabilities: Accounts payable and accrued expenses $804 $796 Income taxes payable 17 5 -- --- Total current liabilities 821 801 Long-term debt 3,366 3,522 Deferred tax liabilities 992 981 Other non-current liabilities 725 727 --- --- Total liabilities 5,904 6,031
Commitments and contingencies
Stockholders' equity: Preferred stock, $.01 par value, 15,000,000 shares authorized, no shares issued - - Common stock, $.01 par value, 800,000,000 shares authorized, 253,839,196 and 253,685,733 shares issued and outstanding for 2009 and 2008, respectively 3 3 Additional paid-in capital 3,143 3,140 Accumulated deficit (298) (430) Accumulated other comprehensive (loss) income (112) (106) ---- ---- Total stockholders' equity 2,736 2,607 ----- ----- Total liabilities and stockholders' equity $8,640 $8,638 ====== ======
A-2
DR PEPPER SNAPPLE GROUP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS For the Three Months Ended March 31, 2009 and 2008 (Unaudited, in millions)
For the Three Months Ended March 31, --------- 2009 2008 ---- ---- Operating activities: Net income $132 $95 Adjustments to reconcile net income to net cash provided by operations: Depreciation expense 39 34 Amortization expense 10 14 Amortization of deferred financing costs 5 - Gain on disposal of intangible assets and property (62) (2) Employee stock-based compensation expense 3 1 Deferred income taxes 17 28 Other, net 1 (1) Changes in assets and liabilities: Trade and other accounts receivable (9) 30 Related party receivable - (21) Inventories (24) (35) Other current assets 14 (34) Other non-current assets (8) (11) Accounts payable and accrued expenses 50 (60) Related party payable - 63 Income taxes payable 13 1 Other non-current liabilities (3) (2) -- -- Net cash provided by operating activities 178 100 Investing activities: Purchases of property, plant and equipment (78) (44) Purchase of intangible assets (5) - Proceeds from disposals of property, plant and equipment - 5 Proceeds from disposals of investments and other assets 68 - Proceeds from related party notes receivables - 37 --- -- Net cash used in investing activities (15) (2)
Financing activities: Proceeds from issuance of related party long-term debt - 129 Repayment of related party long-term debt - (145) Repayment of senior unsecured credit facility (155) - Change in Cadbury's net investment - (50) Other, net (1) - -- --- Net cash used in financing activities (156) (66) ---- ---
Cash and cash equivalents - net change from: Operating, investing and financing activities 7 32 Currency translation (2) - Cash and cash equivalents at beginning of period 214 67 --- -- Cash and cash equivalents at end of period $219 $99 ==== ===
A-3
DR PEPPER SNAPPLE GROUP, INC. OPERATIONS BY OPERATING SEGMENT For the Three Months Ended March 31, 2009 and 2008 (Unaudited, in millions, except per share data)
For the Three Months Ended March 31, --------- 2009 2008 ---- ---- Segment Results - Net Sales Beverage Concentrates $243 $222 Packaged Beverages 944 978 Latin America Beverages 73 95 -- -- Net sales as reported $1,260 $1,295 ====== ======
For the Three Months Ended March 31, --------- 2009 2008 ---- ----
Segment Results - SOP Beverage Concentrates $150 $126 Packaged Beverages 107 101 Latin America Beverages 9 17 --- -- Total segment operating profit 266 244 Unallocated corporate costs 63 50 Restructuring costs - 10 Other operating income (62) (2) --- -- Income from operations 265 186 Interest expense, net (54) (31) Other income 3 - Income before provision for income taxes and equity in earnings of unconsolidated ---- ---- subsidiaries as reported $214 $155 ==== ====
A-4
DR PEPPER SNAPPLE GROUP, INC. RECONCILIATION OF GAAP AND NON-GAAP INFORMATION For the Three Months Ended March 31, 2009 and 2008 (Unaudited)
The company reports its financial results in accordance with U.S. GAAP. However, management believes that certain non-GAAP measures, which reflect the way management evaluates the business, may provide investors with additional information regarding the company's results, trends and ongoing performance on a comparable basis. Specifically, investors should consider the following with respect to our quarterly and year-end results:
Net sales and Segment Operating Profit, as adjusted: Net sales and Segment Operating Profit exclude the loss of Hansen product distribution and are on a currency neutral basis.
For the Three Months Ended March 31, 2009 ----------------------------------------- Latin Beverage Packaged America Percent change Concentrates Beverages Beverages Total ------------ --------- --------- ----- Reported net sales 9% (3)% (23)% (3)% Impact of loss of Hansen product distribution - 5% 3% 4% Impact of foreign currency 2% 1% 21% 3% --- --- --- --- Net sales, as adjusted 11% 3% 1% 4% === === === ===
For the Three Months Ended March 31, 2009 ----------------------------------------- Latin Beverage Packaged America Percent change Concentrates Beverages Beverages Total ------------ --------- --------- ----- Reported segment operating profit 19% 6% (47)% 9% Impact of loss of Hansen product distribution - 10% 3% 4% Impact of foreign currency 2% 4% 30% 5% --- --- --- --- Segment Operating Profit, as adjusted 21% 20% (14)% 18% === === === ===
EPS excluding certain items: Reported EPS adjusted for: 1) the net gain related to the Hansen contract termination payment as well as the sale of certain distribution rights, and 2) restructuring costs in 2008.
For the Three Months Ended March 31, --------- Percent 2009 2008 Change ---- ---- ------
Reported EPS $0.52 $0.38 37% Net gain on Hansen termination and sale of certain distribution rights (0.15) - Restructuring costs - 0.02 --- ---- EPS, excluding certain items $0.37 $0.40 (8)% ===== =====
2009 Net sales and EPS excluding certain items: 2009 expected net sales adjusted for the loss of Hansen product distribution and on a currency neutral basis. 2009 expected earnings per share excluding net gains related to distribution agreement changes
2009 Net Sales Guidance Percentage Growth ----------------- Reported net sales (2)% to (4)% Impact of loss of Hansen product distribution 4% Impact of foreign currency at spot rate 2% --- Comparable currency neutral net sales 2% to 4%
2009 Earnings per share guidance 2009 ---- Reported earnings per share $1.85 to $1.93 Net gain on Hansen contract termination payment and sale of certain distribution rights $0.15 ----- EPS excluding certain items $1.70 to $1.78
A-5
SOURCE Dr Pepper Snapple Group, Inc.
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